Every week, CAPA – Centre for Aviation, produces informative, thought provoking and detailed market analysis of the aviation industry. With supporting data included in every analysis, CAPA provides unrivalled and unparalleled intelligence.
In this week’s edition, our global team of experts deliver you a wealth of insightful commentary on the latest news and trends affecting the commercial aviation industry, including:
- bmi regional: new codeshares with Air Dolomiti and Loganair mark new phase of development
- Heathrow Airport’s third runway seems set to fall victim to political expediency – yet again
- Deteriorating ROIC overshadows WestJet’s revenue improvement, but its ambitions remain high
- Why Berlin Brandenburg Airport must become Germany’s Suvarnabhumi & Tegel should not close
- Northeast Asian LCC subsidiaries consider IPOs – but risk hurting parent group strategy
- Air Europa’s parent Globalia aims for Madrid Airport to become a hub “like Dubai”
Bmi regional: new codeshares with Air Dolomiti and Loganair mark new phase of development
On 7-Aug-2017 bmi regional began a new codeshare with Air Dolomiti, the Lufthansa-owned Italian regional airline. The agreement takes bmi’s code onto five routes from Munich to Italy operated by Air Dolomiti (Venice, Verona, Bari, Bologna and Florence), adding significantly to the single destination in Italy that it serves with its own aircraft (Milan Bergamo).
Separately, a new (smaller) codeshare has been announced between bmi regional and its sister airline Loganair, both of which are owned by Airline Investments Limited.
These codeshares mark a new phase in bmi regional’s development since it became independent of Lufthansa ownership, while also showing the continuing importance of its relationship with Lufthansa Group (its other codeshare agreements are with Brussels Airlines and Lufthansa itself).
After cutting capacity and trimming its network in 2014, bmi regional has enjoyed strong growth since then. The UK regional airline’s Munich base, established in 2015, became its biggest airport by 2016. Double digit capacity growth has continued into 2017, but the pace is slowing. Codeshare expansion offers another way to build momentum.
Heathrow Airport’s third runway seems set to fall victim to political expediency – yet again
Rumours are growing that the UK’s Labour Party will try to block the construction of a third runway at London Heathrow Airport (LHR R3) when it is debated by Parliament at a so far unspecified date in the first half of 2018, on the grounds of ‘environmental concerns’.
The current Conservative minority government previously accepted the recommendation of the Airports Commission which in Oct-2016 opted for an additional runway at Heathrow over the expansion of Gatwick Airport, nominating the northern runway preference over an alternative proposal that would extend a runway for dual take off and landing operation.
Now suggestions are even re-emerging of a renewed focus on using regional airport expansion instead of a Heathrow solution.
Deteriorating ROIC overshadows WestJet’s revenue improvement, but its ambitions remain high
A favourable revenue performance by Canadian low cost airline WestJet during 2Q2017 was somewhat overshadowed by the company’s continuing deterioration of return on invested capital (ROIC) performance.
The 9.8% ROIC WestJet posted during the quarter is approximately 6ppt below the high end of the airline’s targeted ROIC of 13% to 16%. WestJet management believes the company has hit the low point of its ROIC performance, as its fortunes in the province of Alberta continue to improve and some of the longer term investments the airline is making bear fruit.
At the same time as WestJet works to improve its ROIC, the airline continues to lay the groundwork to debut its new ULCC in 2018, albeit later than initially anticipated, and develop its long haul network after formally seeking approval for service to China.
Between growing its widebody network and creating a new ultra low cost carrier, WestJet has one of the most ambitious agendas among airlines worldwide. Over the course of the next few quarters, the company’s efforts to achieve its goals on those projects will be watched closely.
Why Berlin Brandenburg Airport must become Germany’s Suvarnabhumi & Tegel should not close
It wasn’t that long ago that few people outside Germany paid much attention to the aviation scene in Berlin. For the capital city of Europe’s largest national economy (and the world’s fourth largest, by GDP) the three commercial airports there (two since Templehof was closed in 2008) were almost criminally underused.
As airberlin implodes and the vultures circle to digest the tastiest parts of the airline that had planned to springboard from Berlin’s (still almost) new Brandenburg Airport, it is time for a renewed focus on the capital city’s airport planning. Plans to close Tegel Airport risk the loss of billions of dollars in economic activity. Constraining airline growth at a new, under-capacity airport would undermine Berlin’s capital city status.
Northeast Asian LCC subsidiaries consider IPOs – but risk hurting parent group strategy
In Northeast Asia there are more low cost airlines that are subsidiaries of full service airlines than there are independent LCCs. Some of the LCC subsidiaries were born not out of necessity, but because LCC growth was regarded as inevitable and full service airlines wanted a head start. Many of the LCC subsidiaries today still have a hazy strategic vision and undefined relationship with their full service parent.
There needs to be greater airline group integration to respond to an acceleration of change in Asian aviation. There is global growth and particularly strong expansion in regional travel as incomes rise and visa restrictions fall. Pressure on long haul, once strongly profitable, requires that the entire full service operation be re-evaluated.
Group integration is risked by an LCC subsidiary having an IPO, which would distance the low cost and full service brands. LCC shareholders may find they are at the whim of the full service airline. These scenarios are different from the successful IPOs of the independent LCCs Jeju Air and Spring Airlines. Korean Air’s Jin Air plans to list by the end of 2017.
Air Europa’s parent Globalia aims for Madrid Airport to become a hub “like Dubai”
Comments by Javier Hidalgo, CEO of Air Europa’s parent group Globalia, that he wanted to create a great hub like Dubai in Madrid are headline-grabbing. Because of this, they are worthy of further examination. He made the remarks while in Bolivia, on a tour of Latin America to seek business development opportunities for Globalia.
For Air Europa, Latin America is the most important source of revenue and growth, particularly while its larger rival Iberia is pausing in its own Latin American expansion. It seems that Mr Hidalgo’s vision is to ratchet up Air Europa’s position on routes between Spain and Latin America by capitalising on Globalia’s hotel and tourism businesses to stimulate demand.
After accounting the importance of Latin America to Air Europa, Part 2 of this CAPA report will use Mr Hidalgo’s reference to a hub like Dubai to assess and categorise Europe’s hub airports according to the number of destinations served outside Europe, in total and by region. Madrid is not like Dubai, but Mr Hidalgo’s comments prompt an examination of the nature of hubs in Europe and how they compare with the world’s biggest international hub.